To get rich, you have to be making money while you're asleep.
-- David Bailey
Investors in stocks should absolutely love this quote, because stocks can make you filthy rich, provided you can find ones that have stood the tests of time and can continue to do so, without your having to constantly check on them. It could be a company's dominance and moat(s) in a growing industry, or its focus on the next megatrend -- if it can capitalize on the opportunities, you should be able to earn solid returns.
Right now, I believe Mastercard (NYSE:MA), Brookfield Renewable Partners (NYSE:BEP), and XPO Logistics (NYSE:XPO) fall right into place, because each stock has been a multibagger and has strong tailwinds behind it.
Brookfield Renewable Partners: A bet on the clean energy megatrend
Clean energy is one big trend that's gradually taking shape, and companies that have already dived into alternative sources of energy should be major beneficiaries. Brookfield Renewable Partners is a fine example.
With a portfolio comprised of 250 renewable-energy facilities with a combined installed capacity of more than 10,000 megawatts across North America, Latin America, and Europe, Brookfield is among the world's largest clean energy companies today.
Brookfield acquires renewable-energy assets -- primarily hydropower -- and sells power to utilities under long-term, regulated contracts, thereby generating steady cash flows. As a yieldco, Brookfield distributes the bulk of its cash flows to shareholders in the form of dividends, which doubles your chances of getting rich with this stock.
In the past five years, Brookfield's per share funds from operation and dividend (also known as distribution) have grown at high single-digit annual compound rates. The company aims to earn 12% to 15% on investments and grow dividends by 5% to 9% in the long run. Those are strong financial targets that, when coupled with the stock's hefty 6.5% yield, make Brookfield an attractive play in the clean energy space. With hydropower likely to remain an important energy source in America, Brookfield should be able to earn solid returns for investors in coming years.
Mastercard: A bet on the mega digitization trend
Mastercard is a top-quality payments processing stalwart that's making boatloads of money and is primed to grow bigger thanks to the digital revolution that's taking place around the world right now.
The bulk of transactions globally are still cash-driven, but Capgemini and BNP Paribas's 2017 World Payments report pegs global non-cash transactions to grow at a record compound annual rate of 10.9% between 2015 and 2020, with developing markets clocking 19.6% compound growth during the period. India is one such economy, and Mastercard, which already has a strong presence in the country, is keen to unlock potential.
What makes Mastercard such a great stock to own is its powerful business, which allows the company to earn a fee and a percentage of transactions every time someone swipes its Mastercard- or Maestro-branded cards anywhere in the world. As the number of users rises, Mastercard's value goes up. This solid "network effect" economic moat helps the company generate solid operating margins, currently to the tune of 50%-plus.
Mastercard stock has been a seven-bagger in the past decade, and while it's difficult to predict if the stock can grow at the same torrid pace, the steady rise in the company's revenues and cash flows and the huge potential in digital payments ahead, especially with e-commerce as a tailwind, still make Mastercard a potential multibagger stock.
XPO Logistics: A bet on the e-commerce megatrend
Statista projects global e-commerce retail sales to more than double to $4.88 trillion by 2021 from $2.3 trillion in 2017. As e-commerce booms, can logistics companies be far behind?
XPO Logistics stock has been a stunner in recent years, minting patient shareholders insane amounts of money. XPO has some tough competitors in FedEx and United Parcel Service, but it has the strongest foothold in a critical market that the other two don't: last-mile delivery.
With manufacturers of heavy goods also warming up to the idea of online selling, last-mile has taken off lately. Movement and delivery of furniture and home appliances to the consumer's doorstep require greater expertise than handling retail packages -- something XPO has mastered over the years thanks to its first-mover advantage. XPO recognized the opportunities in last-mile even as its peers failed to do so, and it is North America's largest last-mile provider today.
That aside, an asset-light business model and aggressive acquisitions are propelling XPO's growth, and these factors are likely to continue to play out as e-commerce gathers steam. Just days ago, XPO launched XPO Direct, a new distribution model that aims to cut delivery times substantially for low costs. Clearly, XPO has its pulse on the changing needs and preferences of e-commerce, which could be the stock's key to success in the foreseeable future.